KRUGER:
Stuart Robert is the Assistant Treasurer and he joins us now. Good morning. What do you say to what the Grattan Institute has just reported? Do they have a point?
ROBERT:
They've got a point in as much their analysis lines up with Treasury as well as the Centre of Excellence in Population Ageing Research, that people will be reasonably well off in terms of their retirement and perhaps more than, than some people would be led to think. But as I mean we agree with everything in the Grattan research paper, but we certainly find that their ultimate thesis, that a large proportion of Australians will have a retirement in line with your expectations to be broadly supported.
KRUGER:
So, given that you agree with that ultimate thesis would you ever consider not increasing a super to 12 per cent?
ROBERT:
No, we wouldn't. The Government has made it pretty clear that we will start the increase by nine and a half per cent onwards in 2021 and 12 per cent by, by 2025. So that remains standing government policy. It's good certainty, it's quite clear what's the progression path is, people complain for it, businesses complain for it and we think it's in line with where it should go.
LUSH:
The report is saying an increase is going to take that money away from low income earners and retirees. Why shouldn't they keep that money and have it to spend now because that would have a huge impact on the economy wouldn't it?
ROBERT:
Well that money is paid for by the employer which is why the Superannuation Guarantee not by the employee, per se. And of course the magic of compounding interest, I think Einstein one of the great forces of nature without hurting him specifically, is it over time those small amount turn into a great big oak tree. So, the idea the small amounts are detrimental, I don't agree with I think they build substantially over time and I think super is a long-term saving vehicle.
KRUGER:
And so this report also says that the super industry is taking us for a ride and that it's scaring us into putting away more we should. I mean firstly, do you agree with that? And are you comfortable with the influence of the super industry?
ROBERT:
Well I won't speak on behalf of the super industry, they can defend themselves positively or otherwise. But the idea that we should save for a rainy day I think is a pretty Australian way of looking at things and the idea that we should take a long-term view to our savings is also important. Whilst I appreciate what Grattan are saying, in terms of the Superannuation Guarantee increasing is not necessarily needed.
The idea that we a providing certainty is important. The idea of continuing to say to Australians 'save for a rainy day' remains important and the idea of taking a long-term approach to super remains important. This lines up with the reforms that we have in the Senate, which all going well, will be debated next week about how we can further increase superannuation fund balances.
LUSH:
Stuart Robert is with us, the Assistant Treasurer of Australia. Is it fair to say, Stuart, that the vast proportion of us know very little about our super? How it is made up, what sort of percentage is it going to lead to, what sort of return when we actually retired. We could do with an education program around all this couldn't we?
ROBERT:
Sadly, I think that you are right. If you look at the average Australian's biggest form of wealth is their home, the second biggest form of wealth is super. Yet super would have to be the one financial product that Australians are completely and utterly disengaged with. I spoke to the Financial Services Council last week, the peak body in financial services in Australian and just ask the audience and these are the major players nationally in this space, who's super fund that engage with them more than once, more than the annual statement in a 12 month period. I have six hands out of 250 in the room. Which is outrageous.
Super funds have better lift their game and engage with Australian and likewise I love it to Australian took a greater interest in their super. Where their money was. I mean 14.9 per cent of Australian have three super funds. 39 per cent have two super funds. Australian should ostensibly have one if they can. It should be in a performance, or a fund that is performing in line with their values, their expectations at their stage of life and they should be actively engaged. So you and I are in a unity ticket there.
KRUGER:
So, Stuart Robert, I guess when it comes to actively engaging people you know the silver lining up this Grattan report is that people will pay attention if they think the super industry is taking them for a bit of a ride. If they think that the super industry is benefiting from them putting more than they need to into super, is that you know, is that something that you'd welcome?
ROBERT:
I'd welcome the fees and charges cut back. Next week in the Senate we'll be debating the Protecting Your Super Bill and that's going to limit fees on most low accounts no more than 3 per cent. That's going to ban exit fees and it's going to stop the erosion of small super balances for those under $6,000 or those under 825 by changing the opt-out to opted-insurance. That's expected to save half a billion dollars in fees alone. Three billion dollars in insurance premiums, so that's all about stopping super balances from being erode, because in many ways insurance which is not generally used in some cases, I emphasise in some cases, is eroding up to 33 per cent of superannuation guarantee payments.
So, I'd love Australians being engaged with how much super they are getting, what's the fees are, where their super is placed, what the insurance premiums are. Because there are many, many Australians and I'm talking over a million who have got multiple accounts and probably with multiple insurance products, some of them they may not be able to claim on because insurance says they can only make a claim on one policy at a time.
LUSH:
The one demographic that might struggle, apparently according to this report, are older women who rent. They suggest increasing Commonwealth rent assistance by 40 per cent are you likely to do that?
ROBERT:
We won't, Commonwealth rent assistance is about four and a half billion dollars a year give or take, and it goes to about 1.3 million Australian and if we break that 1.3 million down about 20per cent of those are pensioners and it is likely to be an elderly Australian lady who is under some strength or some stress she'll be on the pension. Now the changes we made in 2016 which was to change the asset threshold meant that 50,000 more Australian actually were eligible for the full pension and we think that this is a fairer way of dealing with the situation of an elderly Australian lady who needs greater access, rather than dealing with registered as a whole 1.3 million recipients, when only 20 per cent fit into that pension category.
KRUGER:
You're with Paula and James on Breakfastand we're speaking with Stuart Robert he is the Assistant Treasurer of Australia and we're keen to hear from you to. 1300 222 720 is our number or you can send a text on 0437 922 720.
Stuart Robert one issue that people do tell us that they're interested in talking about is the age pension assets test. Now this report or suggests loosening the age pension asset test by cutting the pension to a slower rate, once you get above that asset free amount. Now is that something you could look at?
ROBERT:
Well the Grattan report was more interested in the taper than the test. So, they're more interested in getting well asset test taper I suppose, to be precise in language, they'd like to see it lowered from 3 bucks I think down to $2.25 or there abouts. Now we increase the asset taper test for $3 starting the first of January last year and the whole point of doing that was also to allow the asset threshold when the asset pension for the aged pension kicks back in, for example if you were a single non-homeowner your pension started being reduced once your assets hit 360,000 [dollars]. The changes we made last year meant that the asset limit is 450,000 [dollars]. So that's where the 50,000 more Australians got access to, to fuller a pensions. So, we think in taking that approach we're getting more vulnerable Australians into full pension is more important and that's what the asset test changes we made were designed to do.
LUSH:
Just a final question Stuart, do you feel you are under pressure from the super industry, who of course it's in their interest to see more of us putting more amounts of money into super because they can clip a ticket?
ROBERT:
Well, I think the Government's strength has shown the debate of the bills in the Senate next week where we're capping fees, we're capping, getting rid of exit fees, we are changing the way default insurance is done. There is a whole bunch, in fact there's five bills going to the Senate next week that it is all about making it fairer for Australians and about keeping more money in Australia. And I think that's pretty much demonstrative with our approach the super industry.
We like the super industry. We like a strong industry. The Royal Commission, of course, is looking into banking and superannuation insurance to make sure we got a transparent super industry. But the government is more focused on everyday Australians. That's our primary focus, that's what we're all about and that's what the Senate changes next week will hope to achieve.
LUSH:
Stuart Robert, thank you very much indeed for joining us, Assistant Treasurer of Australia.
Labor also supports raising the rate of super, we asked them to provide a spokesperson but they didn't have anyone available.